Social Networks and informal mechanisms of collaboration

Under the pressure of a growing request for investment returns, companies have traditionally tried to automize or “re-engineer” their own business processes. This practice of revising the company takes the shape of a typically top-down operation in which the concrete application of the principles of benchmarking, six-sigma or lean production attempt to squeeze the small extra return from a company’s own business. Faced with this, in more mature companies awareness is growing that the application of this logic is no longer efficient, as it once was. New models of analysis and intervention are therefore beginning to be looked at, discovering within this the role of the “social” collaboration and connection mechanisms that are so widespread and sensational outside of companies.

This article will look at how it might be possible to assess and better understand key factors of organizational performance – efficiency, key competencies of the company, the role of stakeholders and their involvement – through a perspective of organizational and social network analysis in order to reveal new opportunities for profit and effectiveness. We will explain these applications through some case studies that have involved large public and private companies (in Italy and abroad).

There are many articles, papers and books today that loudly proclaim the power of networks within companies. Social software, spurred by the success of Facebook, Twitter, and LinkedIn, are starting to make their way into companies. In the attempt to come out from one of the largest recessions in memory, companies are starting to review their traditional management and work processes. This is not without good reason, as highlighted in the 2009 report by John Hagel for Deloitte, The Big Shift (http://bit.ly/dJmT9V), which pointed out some very significant long-term phenomena (from the last 40 years):

The continual increase of turnover and the size of the main companies listed on the stock exchange;

A substantial stability of the efficiency and productivity indexes;

The deterioration of ROA (Return on Assets) for big companies, a sign of a difficulty to make the most of their assets, firstly the human capital;

A loss of motivation and interest in their own work by approximately 75% of employed staff.

Most of these companies have entrusted the improvement of their performances to traditional top-down processes focused on methods to understand and identify inefficiencies. These methods inevitably generate more complex procedures and more rigid regulations that translate into the “malaise of employees” highlighted by the Deloitte study.

It is therefore not surprising that social software – facilitating collaboration within companies – is seen as a positive experience by the workforce, but also considered in a manner diametrically opposed by management. The bottom-up approach, centered on people, for the improvement of performances is in sharp contrast with traditional logic (top-down) focused on the efficiency of business processes. And it is precisely here that the cause of existing tensions lies. The pressure on performances is such that more mature companies wish to experiment on new, non-traditional paths, in order to increase their efficiency and effectiveness. Many are closely watching Social Business movement, which today represents the attempt to bring the collaborative and enabling logic of social media both inside and outside of companies, seeking a better involvement of their clients and suppliers; looking at this approach as at the new era of organizational performances.

If we look at the modern company of today, its complexity is very far from that of the industrial era. The ecosystem existing around and within the company requires a methodological system and a series of much more refined tools in order to understand how work needs to be carried out.

If Business Process Analysis (BPA) is a technique suited to the company of the industrial era, Social Network Analysis (SNA) is the ideal technique for Social Business. BPA is a top-down analysis tool concentrated on processes regardless of people and their mutual relations. SNA is a bottom-up analysis methodology concentrated on people and their mutual relations, largely independent of any pre-defined activity.

Metaphorically speaking, it is interesting to think of organizational analysis in the same way as a doctor analyzes a patient. X-rays are, for example, a rather effective tool that helps doctors to look inside the human body and diagnose a patient’s problems. In the same way, the tools of organizational analysis help managers to understand the company’s problems and to act accordingly. BPA is very effective for identifying the bones and skeletal structure: it can map the main roles and help to understand what problems they present. SNA instead represents a more sophisticated analysis method that is able to identify the complex muscular, tendon and nervous system. Similarly to an ultrasound, its results may not always be clear and defined, but it is able to trace aspects that are completely invisible to BPA, on which it is able to fully express its potential. In practice companies require both BPA and SNA in order to put in place an effective organizational scanning.

The SNA ultrasound

Thanks to the research works from the scientific community that deal with Social Network Analysis, today we have a body of methodologies, tools and experiments at our disposal for the analysis and visualization of social networks both outside and inside companies. The maturity of the technology today allows us to analyze and visualize even very large social networks. A great amount of survey techniques has been developed to interpret the maps generated by an SNA. As with any activity that moves from a theoretical field of research to a widespread application, even in SNA, standardized approaches are being developed that may be easily repeatable and give back comparable results when applied.

Returning to the metaphor mentioned earlier, just as in medicine, where the doctor interprets and reads the data extracted from the x-ray and from a series of indicators to then refer everything back to the patient in a comprehensible manner, trying to convey the impact on the person’s well-being and physical health. Nowadays – where this technique is not yet so widespread – the number of specialists able to effectively interpret an organizational “ultrasound” is still low. However, the opportunity for growth which can be glimpsed behind Social Business is so strong that it could push even more structured and mature companies to explore this direction.

What controls are usually available for managers to monitor company performances?

What is generally of interest to companies in terms of monitoring their own health? What are visible even from the outside are the classic parameters such as turnover, profits, cost of sales or value of shares. But what is the value of those parameters inside the company? Which of those is the invisible one that we could only understand through an organizational “x-ray”? How solid and deeply-rooted are our core competencies? How efficient is our organization design? What are the links of trust that maintain our company and govern the relationships – internally and externally – with our stakeholders? How much more effective could we be if we had the chance to see these things?

We will try to answer these questions by showing how a good number of companies, including in Italy, is drawing great advantage from organizational analysis based on the techniques of Social Network Analysis (SNA).

How solid and deeply-rooted are the core competencies of our resources?

The traditional approach for assessing competencies starts from observing the individual, his/her CV, profile, abilities and characteristics in an attempt to understand where there might be gaps to work on. Generally we tend not to consider, even slightly, the way in which the “experts” can be connected to each other. A very strong cluster of specialists – just to give an example – is able to have far more of an effective impact on the company compared with an isolated group (Fig. 2).

In large industrial companies it is not rare to find strong concerns for the aging workforce and for the risk connected with the loss of highly technical competencies.

When a specific area is present that should cover most of the operational areas such as Quality Assurance (QA), it is not just the specific competency of that area that is important, but also how that competency is being effectively used to maintain relationships with internal clients (Fig. 3).

On the map shown below, the Quality Assurance (QA) role shows the interactions with other areas. The size of the nodes reflects the relative demand for connections. It can be noticed how the Quality Assurance role is only primarily connected to four of the other areas. It is at a very low level in terms of demand, leaving the company plenty of room for improvement. In short, if it is believed that the people and their respective talents are the key to the value that the company is able to generate, SNA is the right tool to show how much these expert talents are connected to one another, but also if and in what way they are connected to the roles with which they should collaborate/operate.

How efficient is your company?

If we look at the dictionary definition of “efficiency”, we can note two subject areas which are very different from each other. The first concerns machines and reads: “…the relationship between the work carried out (input) and the effect generated (output)…”; the other is much more centered on the people: “…the use of knowledge, abilities, competencies and capabilities to produce a result…”. It is not difficult to understand which of the two different definitions is more suited to describing today’s business processes. The first definition is certainly appropriate for describing companies from the industrial era; but the world has moved on. Sharing knowledge is the platform that today’s efficient companies are based on. Over 50% of work requires knowledge to be shared with others – through activities of problem solving, generating new knowledge/innovation, cooperation, operational support, etc. – contrary to the industrial era when most of the work was based on individual competencies and individual contribution.

One of the tools most used by managers for enacting positive change in their own companies is the organizational structure. Continual efficiency research pushes them to divide, segment, structure: customer services, production, marketing, the hierarchical level and any possible combination of these. And then to rebuild cross-cutting coordination and integration structures; specialist areas, product lines, market areas, specific task forces… Unfortunately the effects of these activities on efficiency can only be measured retrospectively: that is, once the external analysis metrics become available. So how is it possible to look inside the company and try to identify how effective its organizational structure is? BPA can measure intra-unit flows and simulate work flows by using sophisticated modeling systems. These techniques are extremely expensive and long in terms of both economics and resources. SNA can identify how the work is actually carried out on an operational level. Starting from the assumption that efficiency is strictly connected with the effectiveness of sharing knowledge in the company among different business units, it is possible to draw up a budget of how knowledge is shared within the company by looking at the supply and demand between the different areas of work. If the demand – ideally – is balanced between the different BUs (and there are therefore no overloaded or underloaded areas) we can declare state that the company is efficient. Inevitably however some organizational units will be discovered to be overloaded with demand whereas others receive very little compared to the knowledge that they could, potentially, circulate. Both situations deserve thorough analysis. In order to illustrate the way in which SNA is used to assess organizational efficiency, the method has been implemented with the IT division of an important major Italian bank.

Figure 4 shows the balancing of supply and demand and has been used to identify which of the 40 organizational units analyzed had a greater variation both in terms of the excess demand that the business unit directs to other units (value sink), and in terms of the excess demand of the business unit on a specific unit (value source). Neither of these extremes is sustainable if we intend to reach maximum efficiency. Value sinks ask a lot of other units and give back very little in return. Value sources – although they may appear as more positive – risk becoming bottlenecks that slow down the entire organizational efficiency and must likely lean on other resources in order to satisfy the requests they receive.

The organizational units that have been identified in extremes in this analysis must therefore be subject to a careful review that may increase the overall level of efficiency.

But what are the reasons behind these imbalances? For value sinks; perhaps they are due to a lack of competencies or experience? Or a lack of visibility? Are they in fact too rich in resources (overstaffed) and do they create phantom demand towards other units? For value sources; is the demand from other units high because they lack competencies, abilities, resources or – perhaps – delivery capabilities? Do they deliberately avoid turning to other units for operational support?

In summary, organizational inefficiencies can have a very rapid impact in terms of ROI. Organizational units that are under or over staffed can be masked from directors’ eyes. BPA analyses can be intrusive, costly and time consuming. Through SNA, with a very modest effort, the keys to inefficiency can be quickly identified and corrective actions can be put into place.

How efficient are we at involving our stakeholders?

When companies talk about their stakeholders they often refer to external groups like their clients, suppliers or even communities in which these groups operate. In today’s companies the term can also be applied to internal organizational units that are to be involved in the company in a cross-cutting way rather than in a hierarchical way (as tradition would have it). Fundamentally what we desire is to have relationships of trust with our stakeholders, both those inside and outside the company.

The traditional approaches of involving stakeholders concern the identification, categorization and, subsequently, a communication strategy tailored for their effective involvement. However, nowadays the number and size, in addition to the complexity, that a company can reach make this procedure take on rather discouraging characteristics. For companies operating in the public sector, all of this is aggravated by the numerous members of staff in contact with external stakeholders.

SNA methodologies are in fact an excellent tool for making the “ecosystem of stakeholders” visible. SNA is able not only to identify direct relations between individuals inside the company and stakeholders outside of it, but also to trace relationships that external stakeholders have with other external stakeholders. This much richer snapshot can be a tool that is notably better for understanding the real impact that stakeholders can have on performance.

To illustrate the involvement of a company’s external stakeholders we have used the example of two cases taken from the public sector: the first is a regional board from the United Kingdom, whilst the second is an Australian social service whose objective was to better understand the complex network of relations it had in place with numerous non-governmental organizations (Figure 5). In both cases, complex questioning of all of the external shareholders was not economically andfeasible, and therefore SNA seemed to be the ideal solution for questioning the internal staff in an attempt to understand with whom regular interaction occurred.

For the board from the United Kingdom a survey was prepared for the internal staff (the white nodes shown on the map) and a selection of external partners who could be involved in the ecosystem of the stakeholders. In this map only strong relations are shown. What is immediately clear is that the map could be much more vast and complex and that establishing a priority on the stakeholders is needed. This activity was conducted by the Australian Agency by characterizing the stakeholders according to their potential influence on organizational performances and on the support that they provide to other members of the company.

Based on the results of the survey, the stakeholders have been classified in this comparison matrix which highlights their positioning (and the priority for action) compared to the support and influence that they have on the company. The size of the circles represents the attention that is given to the stakeholders. It is immediately apparent which of the stakeholders requires greater attention (Opponents), which require more support (Promoters) and which instead might potentially receive less information (Minority).

In summary, SNA can help companies to visualize their complex network of relations with stakeholders and make those who require privileged attention emerge. All of this not only helps the company’s internal efficiency, but it also builds a new revenue system and ROI that allows value to be built through the growth of the reputation.

Conclusions

We have seen, in recent or very recent times, how the power of social media has helped presidents to be elected and long-term dictators to be overthrown. In this article we have identified how even more mature companies are starting to explore the value and potential of Social Business within their own walls. To do this they are starting to move towards to the classic methodologies of SNA, a true organizational ultrasound able to make real dynamics emerge within their own companies and leverage the power of networks and communities to improve business processes and organizational efficiency.

We have then illustrated, through some examples, how a company’s key problems (involvement of stakeholders, core competencies, efficiency of individual organizational units…) can be understood and resolved by using new analysis techniques taken directly from Social Business. The new indications that come to us from these techniques push us to rethink the traditional metrics connected with ROI and with the return for shareholders.